You are right about the cash flows. They have a pretty good track record of generating about $15-20 million in EBITDA per quarter and free cash flows averaged over the last 3 years are around $30 million per year (this is a rough estimate on my part).
As for selling all the MLP eligible assets to TLP, they would if they could but the debt keeps them from doing it all at the same time. Unfortunately, it is the non-MLP eligible assets that TMG will continue to hold that cause all the net income volatility...but don't worry, the 2% GP interest (with dividend split rights) and the 50% TMG ownership in TLP will more than make up for the volatility in the long run (I think). rrb? hedges? you guys have any thoughts?
It is probably worth mentioning some of the key points from the fool.com write up about TMG, which I thought was pretty much on the mark. Here, in brief, are a few of the points.
Book value of around $7 will support the stock 10 cents in earnings for every $12million EBITDA $80 million EBITDA in normal year with no growth $10 share price target / 15 multiple-doesn't factor in future growth Earning less volatile due to new hedging practices Book value might be understated due to accumulated depreciation Stable management debt didn't move much after Katrina/Rita, indicating situation less dire than what stock was showing Emphasis on how boring the company is How management does not promote the company
This is a fantastic buying oppty. The value of the inventory will flucuate over each quarter, but this value has no REAL effect on earnings until the company decides to sell the inventory. Selling of the inventory would only occur if the company went out of business. The inventory is required to maintain the business.
Good comments. I have been re-evaluating TMG. Still not sure what to make of them. Wish management would be a little more direct in stating their goals/direction of company etc.
I like the GP structure(the IDR's to be specific) but the marketing/distribution and other ancillary businesses really mask the growth. They indeed need to continue to drop assets into TMG to drive them higher into the splits which will give the IDR's a higher multiple the closer they get to the 50/50 splits.
Right now, their are better pure play GP's, but TMG remains a value for those that are willing to be patient and wait till the issues are resolved.